Digital Markets Act

Digital Markets Act

Subject :Economy

Context:

The Parliamentary Standing Committee on Finance headed by Jayant Sinha is set to recommend stringent regulation of Systemically Important Digital Platforms (SIDP).

Details:

• It aims to identify and regulate SIDPs and will form part of a report on ‘Anti-competitive practices by Big Tech companies’.
• Once firms are identified as SIDP, they will be obligated to follow a code of conduct that will be binding with penal consequences on the lines of Digital Markets Act (DMA) of the EU.
• This ia a proposed ex-ante — ‘before the event’ regulatory framework — will supplement the ex-post — ‘after the event’ enforcement actions of CCI.
  • The present competition regulations operate post-occurring anti-competitive conduct and are thus called ex-post regulatory framework.

Concept:

Digital Markets Act 

• It applies to the ‘gatekeepers’ in the online space. These companies will have to comply with the new rules.
• The Digital Markets Act (DMA) entered into force in the European Union (EU) on November 1 2022.
• It introduces quantitative thresholds and penal provisions to keep a check on large digital platforms.
• It opens up possibilities of an equal market – based on the merits of their products and services.
• As for consumers it ensures access to a wider array of options as well as a lower price of services by enforcing competition and de-exclusivities.
• The Act designates companies with sizeable dominance in any of the ‘core platform services’ as ‘gatekeepers’. 
  • These services include app stores, online search engines, social networking services, certain messaging services, video sharing platform services, virtual assistants, web browsers, cloud computing services, operating systems, online marketplaces and advertising services.
• What is the quantitative threshold to be deemed a ‘gatekeeper’? 
  • an annual turnover of at least €7.5 billion within the EU in the past three years, or a market valuation of at least €75 billion
  • over 45 million monthly end-users
  • at least 10,000 business users established in the EU.
• The rules state that users will have the right to choose and install their apps and will not be forced to use software by default when installing the OS and web browsers.
• It provides “interoperability”–mean that a user on WhatsApp and one on iMessage should be able to talk to each other
• Obligations on gatekeepers:
  • Gatekeepers must “allow the installation and effective use of third party software applications or software application stores”.
  • Gatekeepers cannot establish unfair conditions for business users or require app developers to use certain services in order to be listed in app stores.
  • Gatekeepers will have to give sellers access to their marketing or ad performance data on the platform.
  • The gatekeepers will have to inform the European Commission of their acquisitions and mergers.
  • The new rules also forbid the gatekeepers from ranking their own products or services higher than others, and from reusing private data collected during a service for the purposes of another service.
  • A proportionate subset of obligations for a non-gatekeeper, attains the stipulated threshold in the future to prevent them from acquiring the same ‘gatekeeper dominance’ by unfair means.
• What happens when rules are violated? 
• Violators can be fined up to 10 percent of the company’s global annual sales,  rising to 20 per cent for repeated infringements.
• In worst case scenarios, they could even be banned from any further acquisitions